Rules of origin make it difficult for businesses to take advantage of preferential tariffs from FTAs

Rules of origin are the key to taking advantage of preferential tariffs in FTAs.

That is one of the proposals raised by the Vietnam Chamber of Commerce and Industry (VCCI) in a document sent to the Ministry of Planning and Investment to propose policies and solutions to serve the development of Vietnam’s economic growth in the current situation.

Businesses need to have barriers removed

According to VCCI, the proportion of export turnover using preferential tariffs under FTAs in total export turnover is currently relatively low and has tended to decrease in the past few years (from 39% in 2018 to 33% in 2020).

Even recent FTAs (CPTPP, EVFTA) have a lower utilization rate. The rate of import turnover taking advantage of FTA tariffs is even lower with some FTAs (from 1% to 8% such as AIFTA, AJCEP-VJEPA, VCFTA, VKFTA, 2018).

According to VCCI, the main cause of this is mainly due to problems related to rules of origin. Specifically, many businesses do not fully understand the rules of origin, or have questions and need advice on how to meet the requirements of the rules of origin, but cannot find a timely and accurate answer. Besides, a number of committed rules of origin are interpreted in a way that is unfavorable for businesses.

In addition, the language in the Circulars on rules of origin under the FTA is not easy to understand and needs to be explained by an official of the Ministry of Industry and Trade (the only entity in Vietnam with sufficient expertise to interpret it correctly).

Therefore, VCCI proposes to the Ministry of Industry and Trade to immediately establish a Working Group on Rules of Origin under FTAs with the task of advising and supporting rules of origin for businesses that want to take advantage of FTA tariffs to export and import goods; and handle policy problems related to rules of origin in FTAs.

In addition, the Working Group will also summarize policy issues related to rules of origin of FTAs, and report monthly to the Ministry of Industry and Trade for an official adjustment decision.

Implement the self-certification mechanism of origin

Self-certification of origin is a modern system of certification of origin, which has become the standard in many countries. This mechanism allows eliminating the procedure for applying for a certificate of origin at the competent authority, thereby saving a lot of time and resources for businesses.

This is considered an important tool to increase the efficiency of taking advantage of preferential tariffs in FTAs, thereby strongly promoting import and export turnover.

In a number of recent FTAs, Vietnam has committed to a self-certification mechanism of origin, but there are reservations about implementation time in the case of certification by Vietnamese exporters. VCCI said that except for 5-6 enterprises that are self-certified for origin according to the pilot model in ASEAN (ATIGA), Vietnam has not applied the self-certification of origin mechanism for any FTA.

The reservation that has not yet implemented the self-certification mechanism of origin under the FTA is considered necessary so that the relevant State agencies and Vietnamese enterprises have enough time to improve their capacity and familiarize themselves with the self-support mechanism of responsibility.

This cautious approach was appropriate in the past, when only a few Vietnamese enterprises had self-certified their origin and therefore the actual impact had not been verified.

However, from 2020, Vietnamese goods exported to the EU under GSP have implemented self-certification of origin according to EU requirements (REX system).

According to VCCI, the actual results show that enterprises benefit significantly from this self-certification mechanism of origin and there are no major or systemic shortcomings that have been identified in recent times. Thus, it is clear that the application of self-certification of origin for exports under FTAs in Vietnam is completely feasible.

Regarding the responsibility of enterprises self-certifying origin, in this new mechanism, the responsibility of enterprises is emphasized.

But according to VCCI, even with the mechanism of issuing certificates of origin by competent authorities, enterprises are still responsible for all information that enterprises provide as proof of origin. certification also only considers documents provided by enterprises.

Therefore, VCCI requests the Ministry of Industry and Trade to study and submit to the Government to implement the self-certification mechanism in the CPTPP earlier than the 2024/2029 deadline that Vietnam has reserved under its commitments and implement the self-certification mechanism in the EVFTA, UKVFTA and at the same time with the self-certification of origin mechanism under the CPTPP.